 "IPO")
Delhi NCR-based hospital chain Yatharth Hospital and Trauma Care Services’ initial public offering (IPO) has opened for subscription on Wednesday, July 26 and will close on Friday, July 28.
The IPO consists of a fresh issue of shares worth Rs 490 crore and an offer for sale by promoters Vimla Tyagi, Prem Narayan, and Neena Tyagi to sell up to 6.55 million equity shares, around 18.4 per cent of the total share capital of the company. The price band is fixed at Rs 285-300 per share.
Of the total proceeds, the company intends to use Rs 245 crore to repay its borrowings and that of its subsidiaries AKS and Ramraja, Rs 25.6 crore and Rs 107 crore to fund capital expenditure for the Noida, Greater Noida hospitals and the two subsidiaries, respectively.
Another Rs 65 crore is intended to be used for inorganic growth through acquisitions, it said.
Another Rs 65 crore is intended to be used for inorganic growth through acquisitions, it said.
In the grey market, the company is commanding a 20 per cent premium over its upper price band of Rs 300.
Yatharth Hospital has a presence in Noida, Greater Noida, and Noida Extension and Jhansi (Orchha) with four hospitals with a total bed capacity of 1,405 beds.
Its hospitals in Noida Extension and Greater Noida are the 8th and 10th largest private hospitals of Delhi NCR, respectively, in terms of the number of beds as of FY23.
Among key metrics, its average revenue per occupied bed (ARPOB) has risen at a CAGR of 11.7 per cent to Rs 26,538 at the end of FY23.
Analysts maintain neutral to subscribe ratings on the issue on the back of the company’s strong brand value, plans to add new specialities and low debt post IPO.
Analysts maintain neutral to subscribe ratings on the issue on the back of the company’s strong brand value, plans to add new specialities and low debt post IPO.
Risks: High fixed costs and competition; subsidiaries have incurred net losses in the past. Besides, the hospital chain derived 33 per cent and 22 per cent of its revenue in FY21 and FY22 from Covid-19, which it may not continue to earn in the future. This can adversely affect the business and its cash flows, as per HDFC Securities.
Here’s what brokerages suggest:
Reliance Securities | Subscribe
India’s current healthcare expenditure is largely dominated by private expenditure. North India regions have lower than average doctor and nurse density per 10,000 population. This is expected to improve going ahead favouring the company’s expansion plans. Its rising focus on building capabilities for new, more advanced and high demand specialities can lead to higher ARPOB.
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The company recently introduced kidney transplantation, bone marrow transplantation and oncology department. These speciality services will add cost to the hospital in the medium to long term, hence margins could see pressure. A major revenue contribution of 34 per cent comes from government deals, which can stretch the debtor days and margin as well. Hence, we recommend subscribing to the issue for listing gains.
BP Wealth | Subscribe
The growing healthcare infrastructure and increasing penetration of medical insurance will benefit the hospital chain in the long run. On the financial front, its ROE improved from 25 per cent to 36 per cent during FY21-23. Retiring debt from the IPO proceeds is expected to improve its profitability ahead. The valuation at P/E of 29.7x based on FY23 earnings is fairly valued.
Geojit Financial | Subscribe
The company’s revenue from operations has seen a steady CAGR of 51 per cent over FY21-FY23 from Rs 229 to Rs 520 crore led by a rise in in-patient volumes, bed occupancy levels and an increase in ARPOB. It also maintained a stable EBITDA margin of 27.6 per cent (3-year average) over this period led by better operational efficiencies. Post IPO, with the repayment of its Rs 245 crore debt, the debt-equity ratio will be reduced to 0.03x from 1.5x for FY23.
Asit C Mehta | Subscribe for long-term
We believe that active collaborations with leading institutions and experts in different medical areas will improve the hospital's diagnostic and treatment capabilities and expansion in other geographical areas through inorganic growth will drive growth.
